The U.S. Court of Appeals for the Third Circuit, affirming a decision by the U.S. District Court for the Eastern District of Pennsylvania, has ruled that a “prior publication” exclusion prevented an insured from obtaining insurance coverage for a continuing course of tortious conduct.

The Case

On February 28, 2012, the Navajo Nation and its affiliates (collectively, “Navajo Nation”) sued Urban Outfitters and its affiliates (collectively, “Urban Outfitters”) for trademark infringement and related common law and statutory violations. Navajo Nation’s central allegation was that Urban Outfitters had “advertised, promoted, and sold its goods under the ‘Navaho’ and ‘Navajo’ names and marks” on the Internet and in retail stores “[s]ince at least March 16, 2009.”

Urban Outfitters tendered the complaint to OneBeacon America Insurance Company and Hanover Insurance Company. OneBeacon had provided commercial general liability (CGL) and umbrella liability coverage to Urban Outfitters prior to July 7, 2010. On July 7, 2010, OneBeacon had issued a “fronting policy” to Urban Outfitters providing identical coverage for which Hanover served as the responsible insurer. The policy was in effect from July 7, 2010 to July 7, 2011. Hanover also issued separate CGL and umbrella liability policies to Urban Outfitters that were effective from July 7, 2011 to July 7, 2012.

Hanover sought a declaratory judgment that it was not responsible for Urban Outfitters’ defense or indemnification. The Pennsylvania district court granted the insurer’s motion for judgment on the pleadings, holding that it had no duty to defend or indemnify Urban Outfitters because Hanover had not begun insurance coverage of Urban Outfitters until 16 months after the alleged infringement had begun.

The district court found that because the claims in the underlying action alleged injuries stemming from advertisements published prior to the policy inception date, any resulting injury fell within the Hanover policies’ “prior publication” exclusions.

The dispute reached the Third Circuit.

The Third Circuit’s Decision

The Third Circuit affirmed.

In its decision, the circuit court found that Navajo Nation’s description of Urban Outfitters’ allegedly infringing conduct was “remarkably consistent” in its complaint. The circuit court observed that, according to Navajo Nation, Urban Outfitters had advertised goods in a manner violative of its trademark:

“[s]ince at least March 16, 2009”;
“[a]t least as early as March 16, 2009”;
“as early as March 2009”; and
“[a]t least since March 16, 2009, and possibly earlier as discovery will confirm, and continuously thereafter to the present date.”
In each instance, the Third Circuit noted, Navajo Nation fixed March 16, 2009 (if not earlier) as a start date for Urban Outfitters’ alleged misconduct. The circuit court then determined for purposes of the “prior publication” exclusions, March 16, 2009 had to be treated as the date of “first publication.” Because Hanover was not responsible for Urban Outfitters’ liability insurance coverage until 16 months thereafter, the exclusions applied – at least in the absence of allegations of “fresh wrongs” that had occurred during Hanover’s policy periods.

The circuit court also found, based on Navajo Nation’s complaint, that Urban Outfitters’ advertisements predating Hanover’s coverage period shared a “common objective with those that followed.” Thus, it concluded that the later ads were not “fresh wrongs,” that the “prior publication” exclusions applied, and that Hanover had no duty to defend Urban Outfitters in the underlying action.